Cracking the Apple Trap

At first, I thought it was my imagination. Around the time the iPhone 5S and 5C were released, in September, I noticed that my sad old iPhone 4 was becoming a lot more sluggish. The battery was starting to run down much faster, too. But the same thing seemed to be happening to a lot of people who, like me, swear by their Apple products. When I called tech analysts, they said that the new operating system (iOS 7) being pushed out to existing users was making older models unbearably slow. Apple phone batteries, which have a finite number of charges in them to begin with, were drained by the new software. So I could pay Apple $79 to replace the battery, or perhaps spend 20 bucks more for an iPhone 5C. It seemed like Apple was sending me a not-so-subtle message to upgrade.

Of course, there are more benign explanations. The new software and recent app updates offer fancy new features that existing users want; maybe the battery is sealed with tiny five-point screws for aesthetic considerations. Perhaps, but this isn’t the first time that tech analysts and random crazies on the Internet have noted that breakdowns in older Apple products can often coincide with when upgrades come onto the market. Many have taken this as evidence of “planned obsolescence,” a term that dates to the Great Depression, when a real estate broker suggested that the government should stimulate the economy by placing artificial expiration dates on consumer products so people would buy more.

To conspiracy-theory-hungry observers (and some of the rest of us), it might make sense that Apple would employ this business strategy. The tech giant, after all, has reached near-saturation levels in the U.S. smartphone market. If iPhones work forever, people who already own the devices­ won’t buy new ones. Furthermore, selling products with finite life spans can be good for consumers, depending on their tastes and how informed they are. The fashion industry, whose entire mission is to essentially render products obsolete long before they cease to be functional, does this regularly. I buy clothes from H&M and other low-cost, trend-driven stores knowing full well that the pieces might fall apart after a year’s worth of washes. And if the clothes won’t be fashionable next year anyway, who cares? Improving the durability — and thereby cost — of the clothes would probably just drive away price-sensitive shoppers like me. Apple has similar considerations. Would the additional longevity of the battery be valuable enough to its core consumers to justify the inevitable higher price?

Economists have theories about market conditions that encourage planned obsolescence. A company has strong incentives to degrade product durability when it has a lot of market power and when consumers don’t have good substitute products to choose from. (That’s what happened with the international light-bulb cartel of the early 20th century, which penalized its members for manufacturing bulbs that lasted more than 1,000 hours.) When Apple started making the iPhone in 2007, its product was so innovative that it could have deliberately degraded durability without fear. But in the last couple years, the company has faced stiffer competition from Samsung and HTC, among others, which should deincentivize planned obsolescence. “Buyers are smart, and if they start figuring out that one of the costs of buying Apple’s products is that they’re constantly nickel-and-diming you, they’ll switch,” said Austan Goolsbee, an economics professor at the University of Chicago’s Booth School of Business.

Well, maybe. A company could still be encouraged to engage in planned obsolescence if consumers perceive large “switching costs” associated with going to a new brand. There are plenty of economics textbooks to choose from, for instance, and yet publishers still artificially make their old editions unusable by changing pagination or scrambling homework questions because they know teachers don’t want to deal with learning a whole new book.

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Similarly, iPhone users have probably purchased complementary products, like apps, that won’t transfer to Android phones. They also probably have a network of iPhone-using friends with whom they can chat free using Apple’s Messages app (instead of paying for text messages). These switching costs increase Apple’s incentives to force its existing customers to upgrade by making older models gradually become more dysfunctional.

There is, however, a simple way to effectively render an old product obsolete without fleecing your existing customers. Instead of degrading the old model, companies can offer innovations in the new model that make upgrading irresistible. Apple succeeded at doing this for a while, offering new iPhones that included major improvements. In the past, consumers were so excited about the cool new features, like Siri, the voice-activated interface, that they may not have minded (or even noticed) if their old phones started to deteriorate; they planned on upgrading anyway. This time around, that’s less true. The iPhone 5S and 5C offer fewer quantum improvements. Consumers are more likely to want their old phones to continue working at peak condition in perpetuity, and to feel cheated when they don’t.

When major innovations remain out of reach, and degrading durability threatens to tick off loyal customers, companies like Apple can still take a cue from the fashion industry. If you can brainwash consumers into developing new tastes that make the old stuff look uncool for aesthetic rather than functional reasons, you still have a shot at harvesting more sales from your existing customer base. But it seems Apple may have already figured this out too. Just check out the wait times for the iPhone 5S in that shiny new gold color.

Catherine Rampell is an economics reporter at The Times. Adam Davidson wrote this week’s feature on Obamacare.

A version of this article appears in print on November 3, 2013, on Page MM16 of the Sunday Magazine with the headline: Cracking the Apple Trap. Today's Paper|Subscribe